ACARP Conference – September 2007 Lessons from Manufacturing

1. ACARP Conference – September 2007 Lessons from Manufacturing

2. Within Manufacturing there are two dominant philosophies that are driving productivity improvement and quality – Lean Thinking and Six Sigma Within the Australian Coal Mining community today BHP Billiton - Six Sigma BMA - Six Sigma Rio Tinto - Lean Six Sigma Peabody - Lean Six Sigma 2

3. Six Sigma The aim of Six Sigma is to systematically improve processes by eliminating defects. One standard deviation - around 68 percent. Two standard deviations 95 percent. Three standard deviations about 99 percent. Six sigma quality – 6 standard deviations from the mean represent defect levels below 3.4 defects per one million opportunities 3

4. Productivity Improvement If the aspirational aim of Six Sigma is to eliminate defects to less than 3.4 per million… Why are so many Six Sigma projects themselves defective? 4

5. Motorola has reported over US$17 billion in savings from Six Sigma as of 2006 (20 years implementation) 2006 results were impressive. Sales grew 22% to a record $42.9 billion. Net earnings were $3.7 billion. 5

6. In 2006 Toyota’s Sales grew 13.4% to a record $179 billion. Net income was $11.7 billion. Lean is built around the concepts of the Toyota Product System. Lean’s focuses on improving the 'flow' or smoothness of work, eliminating waste / variation and the pursuit of perfection. 6

7. What are the lessons that the mining industry should learn from manufacturing? 7

8. Lesson – reduce variability Perhaps the most striking common philosophical feature is the pursuit of the continual reduction of variability and the elimination of waste. Why is this important? Both Lean and Six Sigma have different philosophical approaches but share many common tools. 8

9. Continually reduce variability If you have high variability you will pay for it through. Long Cycle times and high WIP levels Wasted Capacity (low utilisation of resources) Lost throughput Factory Physics – Hope & Spearman pg 623. Law 11 of Factory Physics# (Pay me now or pay me later) 9

10. Case Study - Utilisation Focus on reduced variability 66% Utilisation 3.75 m / operating hr Better conditions 15% Utilisation 1.0 m / operating hr a X 10

11. Lesson – Implement the Philosophy Implement the philosophy not just the tools. 11

12. Lesson – Learn by Doing Teach and practice the use of tools in the context of real work problems. They don’t teach the tools and then go looking for a problem. People Learn by doing! 12

13. Lesson – Go and have a look Slow down. Observe. Talk to the people adding value. Involve these people in the improvements. Go to the place where value is added! Ohno – who is credited with the development of the Toyota production system said... “Management should walk the factory floor at the rate of 100m per hour.” 13

14. Lesson – Learn to See Learn to see non Value Adding Activities 14

15. 24 * 7 Total Available Time Total Available Time Reduced by maintenance shifts Scheduled Scheduled Scheduled Production Time Scheduled Production Time Down Time Down Time Reduced by panel advances Set Set - - up up Available Run Time Available Run Time Time Time Unplanned Recorded Stoppages Impacted by breakdowns as per Deputies reports Reported Run Time Reported Run Time Minor Reduced by getting supplies to face / wait on car / ventilation extensions Unrecorded Net Run Time Net Run Time Unrecorded Stoppages Stoppages Proficiency (speed) of bolters and miner driver Slow Slow Efficient Net Run Time Efficient Net Run Time Speed Speed Repairing roadways, intersections, off-centre or over-wide roadways Rejects Rejects Value Add Time Value Add Time Rework Rework Learning to See Equipment Value Adding Time The proportion of time spent “Adding Value” (cutting and supporting) can be very small 15

16. Total Available Time Total Available Time Total Available Time Total Available Time Scheduled Production Time Scheduled Production Time Scheduled Production Time Available Run Time Available Run Time Available Run Time Reported Run Time Reported Run Time Reported Run Time Reported Run Time Net Run Time Net Run Time Net Run Time Net Run Time Efficient Net Run Time Efficient Net Run Time Value Add Time Value Add Time Big productivity gains - Its about the people There are enormous productivity paybacks in eliminating non value adding time. And These productivity gain do not require big capital investment 16

17. Total Available Time Total Available Time Scheduled Production Time Scheduled Production Time Available Run Time Available Run Time Reported Run Time Reported Run Time Net Run Time Net Run Time Efficient Net Run Time Value Add Time Big productivity gains - Its about the people 17

18. Total Available Time Total Available Time Total Available Time Total Available Time Scheduled Production Time Scheduled Production Time Scheduled Production Time Available Run Time Available Run Time Available Run Time Reported Run Time Reported Run Time Reported Run Time Reported Run Time Net Run Time Net Run Time Net Run Time Net Run Time Efficient Net Run Time Efficient Net Run Time Value Add Time Value Add Time Big productivity gains - Its about the people 18

19. Lesson – Think Systemically Think systemically – not just locally… Map the Flow of Value 19

20. Lesson – Measure Success Develop a “dashboard” that measures success – not just failure 20

21. Developing the “Dashboard” - Measurements for Success Unnecessary Inventory Over Production Defects Transporting Under performance on Production Rates Lots of other ways to help develop the dashboard - safety/cost quality/delivery and Can Do metrics Under-utilisation of employees Unnecessary or excessive motion Inappropriate Processing Waiting The 7 Wastes (plus 1) 21

22. Lesson – Ask your people to solve problems Ask your people to help you solve the problems 22

23. Jim Womack, Jan 2006 “A Lean management system involves managers at every level posing the key problems that need to be solved and asking the teams they lead to develop and implement the answers. This practice of asking the correct questions rather than providing the correct answers… is perhaps the starkest contrast between Lean Thinking and orthodox mass production and the hardest to implement.” 23

24. Lesson – Audit and improve front line management Build into “Standard Work”… processes that audit the way work is done… Develop front line managers into coaches and mentors 24

25. Formal Audits Supervising and auditing improvement programs 25

26. Lesson – Pick up Good Ideas Take on board ideas that work and roll them out… But remember Lean is a philosophy not a series of tools 26

27. Pull system for supplies? Pit Top Drift Pit bottom Lay down area Out bye heading Belt Development Panel 27

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41. Lesson – Manage the doing Manage the doing 41

42. Manage the Doing Ensure: • The people doing the work adhere to standard operating procedures. • The people doing the work managing their performance by-the-hour, shift-to-shift against the agreed metrics. • Supervisors, and managers auditing performance and providing feedback and guidance on progress, by-the-hour, shift-to-shift, week-to-week, month-to-month. • Regular after action Reviews to capture the positive and negative aspects of work activity and resource “problem solution”. 42

43. In Closing Continually reduce variability Implement the philosophy not just the tools People learn by doing Go to the place where value is added Learn to see non Value Adding Activities Think systemically – not just locally… Map the Flow of Value Develop a “dashboard” that measures success – not just failure Ask your people to help you solve the problems Build into “Standard Work” processes that audit the way work is done Develop front line managers into coaches and mentors Take on board ideas that work and roll them out Manage the doing 43

44. Advanced Diploma Lean Six Sigma Nationally Accredited Practical – On the Job 44

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